"During the nine months of 2017 the bank substantially improved the asset quality, normalised provisioning and optimised internal processes that supported the bank's profitability. Excellent results of the last several quarters are consequential on the shareholders' trust in the built business model. It was founded on community-bank strategy and historically strong client relations. Today the key priority in the bank's development is implementing digital solutions allowing to bring the bank to a more advanced level," commented Interim Chairman of the Management Board Mark Nakhmanovich.

Net profit for 9M 2017 equalled to Rub 2.7 billion, increasing more than twofold compared to the result of the previous year.

Net interest income (NII) reached Rub 9.1 billion in the reporting period. The bank improved the result by 25% YoY through efficient management of interest rates on retail deposits and optimised funding structure. Interest income in Q3 amounted to Rub 6.2 billion remaining at Q2 level.

The bank maintains the gradual cost of funds decrease (-67 bps QoQ to 5.4%; -130 bps YoY to 5.9%). High share of interest-earning assets (88%) and steady ROA of 12.2% within the whole reporting period allowed the bank to expand net interest spread by 21 bps YoY to 6.4% and by 56 bps to 6.8% for Q3 2017. Thus, net interest margin (NIM) continued growing and reached 5% for 9M 2017 exceeding both figure for 9M 2016 (4.3%) and annual target value of 4.5%.

Net fees & commissions for 9M 2017 grew by 13% to Rub 3.5 billion compared to the same period of the previous year driven by an increase in net fee income on settlement and bank card transactions. Share of net fees & commissions in pre-provision operating income increased by 63 bps YoY and amounted to 27%.

Operating expenses for 9M 2017 totalled Rub 6.3 billion. Control over expenses and internal processes optimisation allowed the bank to hold expenses at the level of 9M 2016 and maintain business efficiency indices.

Cost-to-income ratio for 9M 2017 was 49% reducing by 4 pps YoY. In quarterly terms the ratio reduced by 4 pps to 46%.

In the reporting period ROE was 15% twice as much of that of the previous year. Operating profit before provisions and taxation to equity ratio was 35%. ROA also doubled to 1.5%.

Assets remained flat QoQ showing 3% growth since the beginning of the year and totalled Rub 245 billion. The share of liquid assets increased by 3 pps to comfortable 20%. Loan-to-deposit ratio was 98% remaining in the target range.

During 9M 2017 gross loans added 2% to Rub 194 billion. Loans to legal entities remained on a par with the beginning of the year and amounted to Rub 127 billion, 5% lower QoQ due to early repayments of several corporate loans.

During all the nine months mortgage loans steadily were growing adding 8% YtD to Rub 49 billion and remained the key growth driver of retail loan portfolio (+6% YtD to Rub 68 billion). Consumer loans also grew by 1% to Rub 17 billion. At the same time, credit card and car loans decreased to Rub 2 billion and Rub 0.1 billion, respectively. The share of retail loans increased by 1 pps YtD to 35%.

The share of non-performing loans (NPLs 90+) declined by 1 pps YtD and accounted for 6.6% as of the reporting date. Coverage of NPL 90+ over the same period improved by 16 pps to 123%. In total, loans overdue by more than 90 days were Rub 13 billion (-13% YtD and -0.4 QoQ).

Corporate NPLs 90+ were Rub 7.6 billion as of reporting date with 8% share in portfolio compared to 9% share as of the beginning of the year. NPLs 90+ in SME segment stood at Rub 3 billion with 10% share declining by 3 pps YtD. Retail NPLs 90+ amounted to Rub 2 billion with 3% share showing significantly better figure than banking sector average of 8%*.

In Q3 2017 cost of risk dropped below 1% and was 0.9% compared to 2.3% in Q1 2017 and Q2 2017 resulting in 1.8% for 9M 2017. Provisioning was Rub 2.7 billion for 9M 2017, contracting by 19% YoY.

The bank's liabilities increased by 2% YtD and totalled Rub 219 billion (-1% QoQ). Within their structure, raised client funds diminished 2% QoQ to Rub 197 billion primarily due to the reduction of expensive corporate term deposits share in the funding structure.

Retail funds remained stable in the reporting period and amounted to Rub 141 billion. During the reporting nine months deposit portfolio continued positive trend (+5% YtD against +2% across the banking sector*; +1% QoQ against -1% across the banking sector*) and amounted to Rub 127 billion by the end of the reporting period. The share of retail funds in total funds attracted from clients was 72%, +3 pps YtD.

Balances on companies' current accounts were Rub 39 billion, adding 10% YtD. At the same time term deposits of legal entities, which are more expensive for the bank, declined to Rub 17 billion (-38% YtD).

Due to earnings capitalisation in amount of Rub 1.6 billion the bank's IFRS equity increased by 10% YtD and totalled to Rub 26 billion as of the end of the reporting period.

Total capital calculated in accordance with the requirements of Basel III amounted to Rub 33 billion as of September 30, 2017 (+6% YtD). Capital adequacy and Tier I capital adequacy ratios increased to 16.2% and 12.5% YtD respectively.

Total capital adequacy ratio (N1.0) and common equity Tier I capital adequacy ratio (N1.1) calculated in accordance with the requirements of the Bank of Russia remained at the level of the beginning of the year and were 12.1% and 8.1% (minimum acceptable levels set by the Bank of Russia increased for CAR support buffer are 9.25% and 5.75%, respectively).

* According to the data provided by the Bank of Russia.

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